How do you know when an oil company spokesperson is lying? See if her lips are moving.
Last December, when Congress worked on the Energy Independence and Security Act of 2007. Senate Democrats proposed shifting several billions of dollars in tax breaks from the oil industry to pay for an extension of tax credits for wind and solar energy development. The oil industry screamed “tax hike,” President Bush threatened a veto, and the provision was removed before the bill was passed.
Now in Colorado, Gov. Bill Ritter, champion of a new energy economy in that state, is being maligned by the oil and gas industry over an issue on the November ballot.
If successful, the initiative will end one of the tax credits the industry now enjoys. Today, oil and gas companies in Colorado are allowed to deduct their property taxes from the severance tax they owe the state. The ballot issue would end that deduction.
Elimination of that tax credit would generate about $300 million annually in state revenues at a time when Colorado is struggling with a $100 million budget shortfall. Much of the new revenue would be used for education assistance and new renewable energy development.
The fossil industries have responded with a blistering ad campaign accusing Ritter of a tax hike. Big Oil implies it’s a tax increase for everybody and warns that gasoline prices will go up and heating bills will “shock” Coloradans this winter. “All things being equal, the cost of this tax will be passed along and increase prices for consumers,” warned a spokesman for “Coloradans for a Stable Economy”, an industry-financed group.
Not true, unless the oil and gas companies decide to rip off consumers. A study just released by the Bell Policy Center, a non-profit non-partisan think tank, finds that Colorado charges one of the lowest severance taxes of any oil-producing state and that terminating the tax credit will not raise gasoline and heating costs.
Oil and gas industries keep raising the specter of higher taxes and higher energy prices because it works, time after time. Voters apparently are cynical enough, gullible enough and frightened enough to believe anyone who claims that Washington wants to raise their taxes, or wants them to pay more for fuel.
I bring this up again because if the next President and Congress do their jobs, we should see some serious action next year to roll-back federal subsidies for the fossil energy industries. With the federal budget in deep deficit and taxpayers about to be saddled with a trillion dollars in new liabilities, finding the funds necessary to build a new energy economy won’t be easy. So, it’s time to do some revenue shifting. We need to end taxpayer subsidies for oil, coal and gas to support our emerging renewable energy and energy efficiency industries, and the jobs they’ll create.
Oil, gas and coal subsidies are classic corporate welfare for industries that are mature and well-financed. Worse, they distort market signals at the same time we want to make those signals work better by putting a price on carbon. They will sabotage the effectiveness of a cap-and-trade regime by underwriting the same carbon-intensive fuels whose consumption the cap is meant to reduce.
Further, we need to channel our public investments into building a new energy economy rather than futile efforts to shore up the old one. As researchers at Oak Ridge National Laboratory reported last June, our dependence on oil, both foreign and domestic, will cost the U.S. economy more than $560 billion this year, with more than $330 billion of that wealth transferred to oil producing countries. Oak Ridge estimates that higher oil prices will reduce U.S. GDP by 1.5% this year. It’s time to stop the bleeding.
Will de-carbonizing fossil energy subsidies cause higher energy prices? No. The subsidies are miniscule compared to the size of the energy markets and, as we now, oil industry profits are breaking records. The simple facts are that the fossil energy industries don’t need taxpayer money, oil prices are set by world markets, and their warnings of higher energy prices are a scam.
In a June 2008 analysis, the Congressional Research Service looked at the impact of a proposal in the Senate to eliminate a corporate tax break given to oil companies three years ago. The proposal would raise the tax rate for major oil companies from 32.9% to 35%, increasing federal revenues an average of $1.1 billion annually — money that could be invested in low-carbon energy technologies. The CRS concluded that this increase would not result in higher energy prices, short-term or long-term (see pages 25-26).
“By virtually any standard of comparison these increases are small,” CRS analysts concluded. “Even the estimated $1.1 billion average annual tax increase represents only 1.4% of the industry’s average profit from 2001 to 2006.”
During the first quarter of this year, the petroleum industry spent $53 million in radio, television and print ads to polish their images as they rake in record profits. That’s a 17% increase from the year before.
So next time you see an oil-industry ad on your television complaining about a tax hike, warning that Congress is about to increase your energy bills, or claiming that what’s good for the oil industry is good for America, take it with a large grain of salt. And if you get the chance, write to the front group that paid for the ad. Tell them to invest their money instead in renewable energy. Or use it to pay their taxes.
– Bill Becker
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